KUALA LUMPUR (Sept 13): Bursa Malaysia said on Tuesday (Sept 13) that net foreign inflow into Malaysian stocks increased significantly to RM1.98 billion in August, from RM175 million a month earlier, as the Covid-19 vaccine-driven economic reopening theme prompted foreign funds to shift their money to Asean markets.

"On a par with most regional peers, Bursa saw a positive net foreign flow of RM1.98 billion in August, a significant increase from a net inflow of RM175 million in July, as foreign funds rotated to Asean markets driven by the reopening theme.

"Foreign funds remained as the largest net buyers on the local bourse [in August], extending their net buying position for seven out of the last eight months, with a year-to-date (YTD) net inflow of RM8.2 billion," analysts of Bursa's research arm Bursa Digital Research wrote in a note.

The analysts highlighted that foreign inflow into the financial sector strengthened by RM1.69 billion from RM458 million in July on the back of the sector's positive earnings results for the second quarter of 2022 (2Q22) and outlook in anticipation of a hike in the overnight policy rate (OPR).

Bank Negara Malaysia's Monetary Policy Committee raised the OPR by 25 basis points to 2.5% last Thursday (Sept 8), in line with expectations for further normalisation of monetary policy as the country's economic growth and inflation gained momentum.

On a YTD basis, Bursa said the financial sector continued to lead in terms of foreign inflow at RM5.2 billion.

Contrary to the positive foreign inflow, Bursa noted that local institutions resumed their selling with the net selling amount intensifying to RM2.4 billion in August from RM41 million in July.

It said local institutions — the only net sellers in August — reduced their position in the financial sector by RM1.68 billion. On a YTD basis, they net sold the financial sector by RM4.1 billion.

Bursa said that local retailers reverted to net buying of RM141 million in August after recording an outflow in July.

In a report released in August, Bursa said July witnessed local retail investors turning into net sellers for the first time in 2022, with a net sold total of RM16.03 million.

Aside from that, Bursa said that its market capitalisation grew 0.8% month-on-month (m-o-m) to RM1.71 trillion in August from RM1.69 trillion in July.

It said the overall market sentiment was lifted by the stronger gross domestic product growth in 2Q22 at 8.9% from 5% in 1Q22, as well as the positive earnings results of most large-cap stocks which surpassed consensus expectations.

"Correspondingly, average daily traded volume improved 29.5% m-o-m to RM1.7 billion in August from RM1.3 billion in July, with increased trading participation across all investor segments, led by local institutions which rose 34% m-o-m," it said.